Case Analysis of Wal-Mart Mexico

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1. Introduction

1.1 History: Wal-Mart first stuck its toe into Mexico in 1991 through a joint venture with Cifra, Mexico’s leading retail company, initially limited to developing Sam’s Club warehouse stores in Mexico. The tremendous success of the first Sam’s Club stores and the impending passage of the North American Free Trade Agreement (NAFTA) encouraged further collaboration, and Wal-Mart and Cifra expanded their joint venture through the 1990s. Wal-Mart purchased a majority stake in Cifra in 1997. Prior to the joint venture, Cifra’s lineup included Aurrera autoservicios (superstores selling food, clothing, and a variety of other items), Superama supermarkets, Suburbia department stores, and Vips restaurants. To this roster, Wal-Mart added Wal-Mart superstores (shifting Aurrera to a budget niche and relabeling its stores Bodega) and Sam’s Club warehouse stores, as well as introducing two new restaurant formats. Wal-Mart-Cifra had fewer grocery stores (though more stores of all formats) than either of competitors Gigante and Comercial Mexicana as of 1993, but had overtaken them by 2000 and today has 326 Wal-Mart, Aurrera, Sam’s, and Superama stores.

Wal-Mart rolled out its “every day low prices” (EDLP) policy in Mexico in 1999-2000. It controlled 49 percent of Mexican supermarket sales in 2001. Wal-Mart also began to post price comparisons with other chains, a practice that in 2002 got it expelled from ANTAD, Mexico’s National Association of Supermarket and Department Stores.

Today, 62 percent of Wal-Mart Mexico’s shares are owned by the U.S. based parent, Wal-Mart Stores.

2. Vision

The vision of the Company summarizes their commitment to Mexico: “Contribute toward improving the quality of life for Mexican families.” Their basic belief is Respect for the Individual, Service to Our Customer, and Strive for Excellence, with Integrity being the underlying principle. 1.3 The Mission Statement

The mission upholding the Company’s permanence and success is value creating. All their efforts, strategies and actions are aimed at this objective.

4. Organizational Chart:

Exhibit: 1

Exhibit: 1

2. Divisions of Wal-Mart Mexico:

Wal-Mart Mexico’s size and geographic coverage dwarf those of its competition. It operates 694 stores in 73 Mexican cities. The Retail formats of Wal-Mart Mexico are:

• Bodega Aurerra
• Wal-Nlart Supercenter
• Sam’s Club
• Superarna
• Suburbia and
• Vips

Although 360 of these stores are self-service (the others are restaurants [Vips] and department stores [Suburbia]), Wal-Mart Mexico has 55 percent of the Mexican retail market. The three major formats (Aurerra, 30 percent; Wal-Mart Supercenter, 27 percent; and Sam’s Club, 29 percent) together provide more than 86 percent of its revenues.

44 percent of the entire countries population is concentrated in 25cities metro areas. A bit more than 18 percent live in the capital city’s metro area.

Mexico’s rural population accounts for about 34 million or about 33 percent of the country’s total population. The retail industry does not have a single outlet in the rural concentrations, which leaves the market to neighborhood Stores, public markets, or street vendors, which, as individual businesses, do not have a significant presence in the market as a whole. |FORMAT |NAME |#OF STORES |# IN 25 MOST IMPORTANT |% IN 25 MOST IMPORTANT | | | | |URBAN AREAS |URBAN AREAS |

|Warehouse |Bodega Aurerra |161 |117 |73% | |Suparmarket |Superama |50 |50 |100% | |Hypermarket |Supercenter |86 |74 |86%...
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